Irish shares exposed to UK retail sales drop

A long list of major Irish-controlled firms with stock market listings in Dublin and London are vulnerable to a further slide in consumer spending in the UK, writes Eamon Quinn.

It comes as many UKretailshares slumped in London, led by Carpetright after official data confirmed the slide in the value of sterling since the Brexit vote in mid-2016 had pushed up British prices and damped down retail spending in UK shops over the key Christmas trading period.

Shares in Carpetright which has over 500 stores, including over 415 in the UK and 21 in the Republic crashed by more than 40%, to value the firm at only £62.5m (€70.8m), after a profits warnings.

The British retail rout spread to a wide range of UK-listed retailers, including DFS Furniture, down 3%; Debenhams, down almost 1% at one stage; B&Q-owner Kingfisher, down 2.5%; Dixons Carphone, down almost 3%; and JD Sports, whose shares fell 0.5%.

Darren McKinley, senior equity analyst at Merrion, said despite their exposures toconsumer spending in the UK, that Irish-listed companies had shown resilience to the challenges they faced from the slide in sterling over the past 18 months.

Nonetheless, many quoted companies, including Ryanair, Dalata Hotel Group, Grafton Group, as well as Greencore and Total Produce, rely on the British market for 20% to40% of their sales. Analysts have said UK consumers are being pinched by the Brexit-driven increase in UK prices, while UK average wages have not increased by the same rate.

Data showed British shop sales slid by much more than expected in December. That capped the weakest year for UKretail since 2013.

“This certainly ties in to much of what we have seen this year,” said Colin McLean, managing director at SVM Asset Management. “In the past, demand has been quite stable and now it’s just a bit more fluid.”

Consumers’ changing tastes and disruption by online businesses were also putting pressure on the UK high street retailers, Mr McLean said.

Carpetright chief executive Wilf Walsh said: “Despite a positive start to our third quarter, we have seen a significant deterioration in UK trading during the important post-Christmas trading period.”

He said: “The severity of the decline in footfall over this key trading period and our more cautious view of the outlook for the balance of the year leads to a significant reduction in full-year expectations.”

“UK consumers have got much more nervous about purchasing big-ticket items,” said Charles Allen, a Bloomberg Intelligence analyst.

The European Commission has cautioned about “spiralling” house prices and has questioned the number of supposedly permanent restructured mortgage deals that banks strike with distressed borrowers that fall apart.